A Tale of Two Endings

In this installment of Networking UPDATE: Mobile & Wireless Edition, I want to talk about two interesting efforts that are coming to an end. First, Palm is acquiring Handspring, the maker of the Visor and Treo devices. Second, Barnes & Noble has closed its eBook store. Both developments sadden me, but in Handspring's case, the bad news might ultimately have a silver lining.

Handspring was cofounded by Trip Hawkins, the man who invented the original Palm Pilot, and Donna Dubinsky, a marketing genius. They left Palm and broke out on their own after 3Com (which owned Palm) reportedly reneged on a promise to spin Palm off as a separate company. Handspring's original product, the Handspring Visor, resembled a Palm III in design but offered one innovative feature: a slot for "springboard" modules. This feature was an expansion option that offered a way to connect not only add-on hardware but also any necessary drivers and applications software, which resided in ROM on the module. The resulting seamless plug-and-play expandability of the Visor line was (and remains) unique among handheld devices. You could simply add a springboard module to a Visor and it would work--without any need to synchronize the device with a host PC. Although other PDAs offer expansion options, none of them work as seamlessly as the springboard.

Unfortunately, the Visor's expandability never attracted enough business to make the company viable, and Handspring was badly hurt during the technology downturn of the late 1990s. However, the company made a remarkable comeback with the Treo device, which combines PDA and cell phone technology. Other vendors have combined this functionality, but Handspring got the Treo right, in part with a unique flip-top design that exposes a tiny but functional keyboard. The Treo is therefore useful for email as well as for phone and traditional PDA functions.

Palm has seen its own sales drop off in the face of competition from Pocket PCs and other PDAs, and in June announced plans to acquire Handspring. Last month, with the end of a waiting period that a federal antitrust act had mandated, the deal moved closer. Provided the stockholders of both companies approve, the deal should go through this fall.

Handspring always created innovative products but lacked the marketing power to push them. The merger should take care of that problem, but I'm more excited about the long-term prospects of the merged company. If Palm's management personnel are smart, they'll go to great lengths to retain Trip Hawkins and the rest of Handsprings engineering and design staff--a particularly innovative group of people. For more information about this story, check out the following URLs.

I can't see any silver lining to the end of Barnes & Noble's eBook store. Just 3 years ago, Barnes & Noble and Microsoft jointly announced the creation of an "eBook Superstore." Evidently, it never took off. Browse http://ebooks.barnesandnoble.com now and you'll find the sad message, "Our eBook store is closed."

eBook sales still haven't taken off in a big way. A recent press release from the Open eBook Forum proudly announced a 40 percent growth in worldwide unit sales of eBooks in the first half of 2003 compared to the first half of 2002, but the numbers remain small. Fewer than 1 million eBooks were sold in that period, with revenue of less than $5 million. To put this number in perspective, in April, Barnes & Noble announced first-quarter sales of close to $100 million. I suspect that the small dollar volume of eBook sales didn't pay for the cost of the necessary infrastructure to support it.

According to email from Barnes & Noble, eBook titles not downloaded by December 9, 2003, will no longer be accessible. Users who have downloaded an eBook to a Pocket PC, in particular, might lose their ability to unlock and view the book should they have to perform a hard-reset or perform a ROM upgrade on their device.

The closure of Barnes & Noble's eBook store has also exposed a particularly nasty problem for users of Microsoft's Reader software. Most Reader eBooks are encrypted through the Digital Rights Management 5 (DRM5) format, which limits users' ability to copy files between devices. As an author myself, I agree that copyright needs to be protected, but this isn't the right way to do it. Paper books can be freely traded, passed around, resold, or donated to libraries. The DRM5 model, which locks content to a particular device, doesn't provide anywhere near the necessary flexibility. Combine that inflexibility with the limitations of the devices that users view eBooks on, and you can see why paper books continue to dominate the market.

However, eBooks are far from dead. I'm finding more and more electronic documents in Adobe Acrobat format (although these documents are primarily technical manuals or other forms of online documentation). And although eBook numbers remain small, they're growing--whereas sales of traditional paper books remain pretty much flat. Over time, eBooks might become a major force in the publishing world. Perhaps Barnes & Noble's eBook Superstore was the right idea, just too early! For more information about eBook stats, see the following URL. http://www.oebf.org/pressroom/pressreleases/stats.htm